Monthly Archives: November 2011

Section 45E of the tax code permits an eligible small employer to claim a tax credit versus a deduction for qualified startup costs and plan administration fees.  The credit is 50 percent of the relevant expenses and is limited to $500 per year for the first credit year and each of the following 2 tax years.  The credit is currently set to expire at the end of 2012; however, it has previously been extended.

For example, if such an employer paid $1,200 in fees to establish a new plan in 2011, and then paid $800 in plan administration fees in 2012, the allowable tax credit would be $500 in 2011 and $400 in 2012.  Thus, the real cost to establish the plan is reduced from $1,200 to $700 because of the $500 tax credit.

An eligible small employer is one who had no more than 100 employees during the tax year preceding the first credit year and only employees who were paid more than $5,000 during that tax year are counted.  Further, as the credit is intended to spur the adoption of new plans, if an otherwise eligible employer established or maintained a plan during the 3 tax years preceding the first credit year, they are not eligible to claim the credit.

Qualified startup costs are not only the expenses incurred to establish or administer an eligible employer plan; they include the retirement-related education of employees about the plan.  Also, the first credit year can be the year before the plan becomes effective as long as the expenses were paid or incurred in that year.  Therefore, fees paid in 2011 to set up a new plan effective in 2012 count.

Lastly, an eligible employer plan includes a profit sharing plan, a Section 401(k) plan, a defined benefit plan, and certain SEPs and SIMPLEs.  And they must include at least one employee eligible to participate who is not considered to be a highly-compensated employee (defined as a 5 percent owner in the current or preceding year or who received at least $110,000 in pay during the most recent prior year).

Jay H. Beltz is PBTK’s Pension Plan Services Practice Leader. Jay is a pension consultant with more than 25 years designing, administering and consulting on tax-qualified retirement programs like defined benefit plans and Section 401(k) plans. He has been involved in establishing and terminating more than 5,000 plans and continues to advise all sizes of employers about the tax and savings benefit of such programs for their employee’s financial well-being. He can be reached at jbeltz@pbtk.com.

According to a recent Employee Benefit News article by Lisa Gillsespie, “Two recent proposals to change the existing tax treatment of 401(k) retirement plans, if enacted, are likely to result in lower account balances for many 401(k) participants, according to a new analysis by the Employee Benefit Research Institute.”

Click here for the full article.

PBTK’s new Pension Plan Consultant Jay Beltz comments on the October issue of Employee Plans News where the IRS posted an article titled, “Two Plans, Two Employers”:

The article addressed the maximum annual amounts that could be contributed to specific retirement plans under a scenario where an individual is employed by a company (and not an owner) and who also had self-employment income.  The IRS pointed out that certain limitations, like those for salary deferrals, apply to the individual, while other limitations, like those for employer funded contributions, apply on an employer by employer basis.

We have reversed the article title above to emphasize the fact that plan contributions made for an employee by separate employers are not aggregated.
An individual could, in fact, receive maximum benefits from funding made by two or more employers.  Therefore, an individual who participates in his employer-funded pension plan is free to choose the plan type for his separate self-employment income; this plan could be a Section 401(k) plan or it could be a defined benefit plan, for example.

The beauty of a defined benefit plan is that, depending upon age and income level, a self-employed individual could contribute and deduct required contributions in excess of $100,000 per year.  After 10 years of such funding, this person should have a retirement plan nest egg from the defined benefit plan in excess of $1 million!

 - Jay Beltz

From a recent article from AP writer David Pitt, the answer is yes. A recent study found that 75 percent of companies who took away their 401(k) matching have brought it back.  In the article, Pitt says that among that group:

_ About 74 percent are continuing payments at the previous level;

_ About 23 percent resumed making contributions to their employees’ accounts, but at a lower rate. Among these companies, the new contribution level was slightly more than half of the original amount; and

_ Just 3 percent resumed making contributions at a higher rate; however, in all but one case the increase was associated with the company freezing or ending its pension plan. The higher amount was intended to make up for some of the lost pension plan benefits.

Click here for the full article.

Piercy Bowler Taylor and Kern (PBTK) announces that Jay Beltz has joined the firm as a Principal and the firm’s pension plan services practice leader. He will provide pension plan consulting including pension plan design, compliance, testing and plan asset reconciliation.

Beltz has more than 25 years of experience designing, administering and consulting on tax-qualified retirement programs like defined benefit plans and section 401(k) plans. He earned his Bachelor of Science degree in Finance from Arizona State University.

“We have found that pension plan accounting and plan design/administrative
advice is more effective when not bundled,” says L. Ralph Piercy, President of
PBTK.  “CPAs know their clients better than third party administrators (TPAs) that try to do both.  TPAs generally do a good job of keeping the books, and we work with successfully with several, but sometimes fail to provide timely plan design and compliance advice.  Jay proactively provides that quality service to our clients and works with other CPAs to benefit theirs.  For 20 years, we have
recommended Jay without hesitation.”

Beltz is a welcome addition to the PBTK team.  He will be based in the Las Vegas, Nevada office and can be reached at jbeltz@pbtk.com.

About Piercy Bowler Taylor & Kern

Piercy Bowler Taylor & Kern is a full-service accounting and business advisory firm that provides accounting and auditing, tax, consulting, valuation and litigation support services. Founded locally in 1990, the firm specializes in the casino gaming and leisure time industries, governmental and not-for-profit organizations, real estate development and construction industries and the legal and general business communities. PBTK is one of the few Las Vegas accounting firms that do SEC audits. For more information on PBTK, visit pbtk.com or call 702.384.1120.